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SOUTH AFRICA


  
  

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 159,886 104,235 113,300 29
         
GNI per capita
 US $ 2,780 2,600 2,820 93
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 080 - (3/09/08)

Defence money allegations
At no stage did President Thabo Mbeki or the Presidency benefit in any way from the strategic defence procurement, says Minister in the Presidency Essop Pahad. The minister was briefing the media August 6 on allegations made in a Sunday newspaper suggesting that money from the strategic defence procurement or arms deal may have been channelled to a political party, with the assistance of the President. He said the Presidency "categorically rejects" these claims, adding that the President is currently seeking legal advice on what course of legal action he or his office may wish to pursue as a result of the allegations. "I state categorically that President Mbeki in no way benefited from any deal," said Mr Pahad. He further denied that President Mbeki facilitated in any way the alleged transfer of funds to the African National Congress (ANC). The minister further called the allegations "very very spurious and highly prejudicial" to the President, government as a whole and the Ministers in the Cabinet.

Avusa, Mbeki and the R30 Million Headline
What response would you expect when a leading newspaper accuses a president of taking money from arms dealers, as the Sunday Times did this weekend? I could think of two possible responses: President Thabo Mbeki admits it and steps down or he issues a forceful pledge to force the newspaper to retract and apologise. The latter response could come with a simple way of proving the point, such as having an independent auditor look at the party's books and tell the world if there was an unexplained R28m there. Sueing is the one legitimate way for a politician to take on the media. Of all the possible attacks on newspapers, this is one an individual is entitled, even obliged, to make, to establish one's innocence. The Presidency is quick to wag a self-righteous finger at the media, but the one time a politician can truly take us on is if a newspaper makes an egregious error. The response from the president was: "I have a clear conscience." I found that a most interesting choice of words. It implies that if he did anything, he feels it was justified. He did not say that the African National Congress (ANC) never took money from the arms companies or their representatives. His spokesman said he personally did not receive money from MAN Ferrostaal. It is reminiscent of the health minister saying last year that she would sue the Sunday Times, but in fact suing them only to get back her health records, not for the serious allegations made about her drinking and borrowing habits. Sunday Times editor Mondli Makhanya has more up his sleeve as a result of his paper's six-month investigation. The huge front-page headline did not have the words "claim" or "allegation" in it, but baldly stated: "Mbeki took R30m and gave some to Zuma". When Makhanya took on Health Minister Manto Tshabalala-Msimang, he had put his job on the line and either the minister or he might not have survived. This did not happen. And now he has taken on a sitting president. There is no doubting his courage. There is an interesting twist now. ANC heavyweight Tokyo Sexwale is now the lead shareholder in Avusa, the company which owns the Sunday Times. His Mvelephanda Holdings recently bought at least 25% of the listed company and put three representatives on the board. Not many people would choose to be caught between Makhanya and Mbeki, and have to mediate the power of the press versus the power of the president. We will have to watch closely to see if Sexwale protects the independence of the Sunday Times editor, and looks after the credibility (and value) of this asset, or moves to find a more malleable editor. Sexwale is too sophisticated a businessman to move in quickly and crudely, but you can be certain he is being asked about his investment at every gathering of his powerful friends and enemies.

ANC Playing 'Good Cop, Bad Cop' With Judiciary Over Zuma Case
The African National Congress (ANC) is giving the judiciary the "good cop, bad cop" treatment as it manages the fallout over ANC president Jacob Zuma's pending corruption trial. ANC deputy president Kgalema Motlanthe came out in defence of SA's judges in an interview published in City Press August 24. This is in contrast with senior ANC and alliance leaders, who have locked horns with some judges on their handling of Zuma matters. But these leaders insisted that Motlanthe's views were not at odds with the party line. ANC secretary-general Gwede Mantashe said Motlanthe's defence of the judiciary provided "context" for the ANC's criticism of some judges, including Chief Justice Pius Langa's handling of matters relating to the ANC president's case. "There is nothing in the int erview of Kgalema that says judges are holier than thou. Kgalema is reminding us of the responsibility to respect the institutions of democracy." Mantashe's views were echoed by South African Communist Party (SACP) boss Blade Nzimande, who added the SACP's voice to calls for the charges against Zuma to be dropped. The SACP says Zuma's rights have been so abused he cannot get a fair trial. After the SACP central committee meeting August 24, Nzimande said Motlanthe's comments on the judiciary were not "anything different" from the alliance's views. "We have noted the interview of the ANC deputy president, and he is not saying anything else. It also does not mean the judiciary is above criticism," he said. The SACP backed demands for the Zuma prosecution to be dropped. This follows calls by sections of the business community, who have also urged the parties to find other ways to end the stand-off between the National Prosecuting Authority (NPA) and Zuma, who is likely to be SA's president after next year's elections. "The SACP is firmly of the view that continuation with the trial of Jacob Zuma is neither in the interests of our country nor that of justice. "The manner in which the prosecuting authorities have handled the investigations and the trial undermines the basic precepts of natural justice ... And we are therefore of the view that he will not and cannot get a fair trial," Nzimande said. Zuma has to answer to 16 charges of corruption -- including racketeering linked to SA's multibillion-rand arms procurem ent. He has been under investigation for more than seven years, and the trial has yet to start. Zuma's lawyers plan a stay-of-prosecution application. "To this end an urgent political solution needs to be found in order to arrive at such a conclusion. The case against Zuma and its handling has for all intents and purposes ceased to be a legal matter, but has become a key political challenge facing our democracy going into the future," Nzimande said. 

While Nzimande would not be drawn on what a political solution would entail, he did not rule out the possibility of an arms deal amnesty as a way forward. "I am not saying rule it out. However, the downside is that one would have to have a credible inquiry, including a possible judicial inquiry, because there are huge clouds hanging over the arms procurement process. This will have to precede such an amnesty process," he said. Other options include legislation along the lines of that in Italy, where laws prevent a prime minister being prosecuted while in office. The chairman of parliament's portfolio justice committee, Yunus Carrim, who20is also an SACP central committee member, supported such legislation. But it is understood ANC leaders prefer a "review" by the NPA of its case against Zuma to drafting legislation as a means to finding a way out for Zuma from prosecution.

Zuma and NPA Agree on Date for Hearing
Lawyers for African National Congress (ANC) president Jacob Zuma and the National Prosecuting Authority (NPA) have agreed on a date for Zuma's legal team to bring an application for a permanent stay of prosecution before the court. This follows intense negotiations between the parties ahead of their appearance before Pietermaritzburg High Court Judge Chris Nicholson August 15 to thrash out future court dates. Contrary to media reports, it is understood there has been "no serious discussion" over a trial date. Today's appearance comes against a backdrop of the NPA saying it is "trial-ready" and Chief Justice Pius Langa warning that courts should discourage pretrial litigation that appears to have no purpose other than to delay the commencement of trials. If successful, Zuma's application for a permanent stay of prosecution would be the final blow to the NPA's investigation. It follows an application to have charges against him declared invalid. Judgement in that matter has been reserved. It is understood that Zuma's legal team and the NPA agreed August 14 that the application for a permanent stay of prosecution should be heard on November 26 and will today ask Nicholson to set it down for two days. Zuma was served with an indictment in December last year and faces a charge of racketeering, four charges of corruption, a charge of money laundering and 12 charges of fraud. 

Zuma believes he is being targeted by forces in his party and the government because of his political beliefs in a bid to prevent him from becoming the n ext president of SA. While those close to Zuma's defence assert that the NPA did not act against him until he became ANC president -- 18 months after Pietermaritzburg High Court Judge Herbert Msimang struck the charges against Zuma off the roll because the state was not ready to proceed -- legal analysts remain sceptical of what they term "Zuma's delaying tactics". University of KwaZulu-Natal law professor Robin Palmer said: "There have been 33 pre-trial applications in this matter. Not all brought by Zuma, but the reality is that we just saw an application by Zuma to have the charges against him declared invalid, we are now seeing a stay of prosecution application, and there is also the Mauritius matter. The NPA say they are court-ready." This month, Zuma lost a Constitutional Court application to have search warrants and seizure warrants against him declared invalid. The Pietermaritzburg High Court will pass judgment on September 12 on Zuma's application to have the decision by acting NPA head Mokotedi Mpshe to charge him declared invalid and set aside. Nicholson is considering Zuma's argument that prosecutors are not entitled to charge him again without hearing representations from him. The NPA said in court that Zuma's application was ill-founded and devoid of any merit in law. It is understood if Zuma loses that application, he intends to appeal. Zuma's lawyers have also applied to the Mauritius Supreme Court to stop the NPA from obtaining the originals of 13 documents used to convict his former financial adviser,20Schabir Shaik, of fraud and corruption. The documents include the diary of former French arms company official Alain Thetard.

ANC continues attack on Scorpions
The ANC rolled out the heavy artillery in the form of ANC national executive committee member Siphiwe Nyanda and Cosatu general secretary Zwelinzima Vavi to defend the decision to disband the Scorpions. On the final day of public hearings in Parliament, Nyanda, Vavi and legal counsel for the Mkhonto we Sizwe Military Veterans' Association produced a long list of what they called the failures of the Scorpions and which they claimed threatened national security. The day was characterised by fractious exchanges between ANC MPs and those of the Democratic Alliance (DA). ANC MPs were determined to undermine any opposition arguments for retaining the Scorpions, giving the clear indication that unless there were substantial further representations from the public the dissolution of the unit was indeed a fait accompli. Vavi told the joint safety and security and justice committees that the officers of the Scorpions had increasingly been diverted from the fight against crime to "political campaigns against certain individuals". 

Labour Unrest
The Congress of South African Trade Unions (Cosatu) general secretary Zwelinzima Vavi August 6 warned of a season of labour discontent with unions pushing for pay rises "above the 11% inflation rate". Vavi told a large crowd of strikers outside Parliament: "We want strikes this year to look at the issue of wages, which are too low." Pay for "bosses" was too high, and the only way Cosatu could "close this gap" was to embark on "more militant action" to demand a living wage that stretched to include benefits such as provident funds, medical aid, transport allowances and housing allowances. Cosatu's march in Cape Town to protest against Eskom's 27,5% electricity price increase and high food and fuel prices drew about 40,000 people, the biggest protest seen in the city for many years. Vavi said Cosatu wanted the government to change its macroeconomic strategy, saying that Finance Minister Trevor Manuel had managed it in a way that enabled him to save "billions and billions of rand" in surplus because South Africa had to be prepared "for a rainy season". Vavi said the rainy season was now. "We are starving now, and we want him to use the surplus and intervene today so that we can be saved from the high prices of electricity increases," he said. The huge strike is unlikely to result in a drop in prices, but it does serve as warning that the labour federation has the muscle to bring the economy to a standstill. Cosatu downed tools in three provincial strikes and one national stay-away, leaving hundreds of thousands of commuters stranded, as well as the transport, education, mining, manufacturing and retail sectors paralysed. About R200m was lost in wages August 6. The federation took to the streets to demand the withdrawal of recent electricity tariff increases, a restructuring of electricity prices to ensure that the poor are not affected and a commitment that price hikes will not result in job losses. Analysts and labour leaders were of the opinion that Cosatu's demands were unrealistic in the current economic climate and the federation should instead use more imagination in its attempt to influence the government. It is common cause that strikes are a last measure and the strongest weapon in a union's arsenal.

Olympics disappointment
South African's Olympic team has returned home with one solitary silver medal and its poor performance had led to lots of finger pointing in what is often considered Africa's sporting powerhouse. It was long jumper Khotso Mokoena who spared the country's blushes with the medal midway through the second week. But when the 131-strong team, the largest in the country's history, left for Beijing, Moss Mashishi, president of the South African Sports Confederation and Olympic Committee, promised it would return with at least 10 medals. In the end, South Africa finished a lowly 66th on the final medals table and 8th among the African countries. Even crisis-hit neighbour Zimbabwe managed a gold and three silvers. Given the high expectations, the disappointment and even anger is understandable. However, Ross Tucker, a researcher at the South African Sports Science Institute in Cape Town, says he is not surprised by the team's poor performance. He presented recommendations to improve South Africa's performance after the 2004 Olympics in Athens. "It wasn't unexpected. Every time we go to the Olympics we do the post-mortem and we say that we need to invest more in sports but nothing is ever done." 

Zim
South African President Thabo Mbeki reconvened power-sharing talks between the MDC and ZANU PF August 29 in the hope that both parties will be persuaded to strike a deal, despite Robert Mugabe committing grave breaches to the Memorandum of Understanding signed by all parties on the July 21. However, Zimbabwe's main opposition party said August 31 two days of power-sharing talks with the ruling Zanu-PF have ended without agreement. Movement for Democratic Change (MDC) spokesman Nelson Chamisa said the balance of power was in dispute. He said President Robert Mugabe wanted MDC leader Morgan Tsvangirai to become a titular prime minister without real authority, which was "unacceptable". Mr Mugabe threatened to form a new government without the MDC. "The MDC does not want to come in apparently," he said August 27, a day after being booed and jeered by opposition MPs at the formal opening of parliament. 

The MDC said its negotiating teams had returned from South Africa August 31 without having achieved a breakthrough in the talks on Zimbabwe's political crisis. "Nothing was achieved in the latest round of engagement in South Africa to break the deadlock. We remain where we were," Mr Chamisa told the Reuters news agency. Correspondents say both sides in the negotiations have agreed that there should be a national unity government, that Mr Mugabe should be president and Mr Tsvangirai prime minister. But the MDC has insisted that the president should cede real executive power to Mr Tsvangirai and stay in office only as a ceremonial head of state. Earlier, the state-owned Herald newspaper reported that the MDC had also proposed that the two leaders chair the cabinet jointly. "The Zanu-PF dismissed the suggestion, not just as insolent, but also stunning ignorance on how government works," it quoted a government source as saying. Meanwhile, Mr Chamisa welcomed the government's decision to lift the ban on aid agencies involved in providing food and other forms of assistance. He said the restriction had been an act of madness. The government had accused some of the agencies of siding with the opposition in the run-up to the presidential election's second round.

Cosatu Slams SADC Support of Mugabe
South Africa's trade union federation, Cosatu has slammed the Southern African Development Community's apparent support of Robert Mugabe, saying the regional body gave the dictator clear signals that it is backing him as leader. The powerful grouping of heads of state effectively endorsed Mugabe as Zimbabwe's leader, after accepting him as head of state at the SADC summit in South Africa early August. Meanwhile, leaked confidential documents revealed August 23 that SADC sanctioned a power-sharing agreement that would have seen Mugabe remain as head of state as well as head of government. The regional body proceeded to put pressure on opposition leader Morgan Tsvangirai to sign the deal during the summit before giving Mugabe the green light to convene parliament when Tsvangirai refused to sign. Mugabe ordered Parliament to convene August 25 ignoring opposition protests that the move could derail the stalled inter party negotiations. However, the move to recall Parliament appeared to backfire on ZANU PF and its ageing leader when an MDC candidate was elected Speaker of the key House of Assembly, the first time that the lower chamber of Parliament is to be led by the opposition. Cosatu said in a statement August 26 that Mugabe, with 'clear signals' from SADC's regional leaders, was now on a mission to secure power to the exclusion of the Tsvangirai lead MDC. The trade union federation said 'it was the worst possible message they (regional leaders) could have given' when SADC 'paraded him (Mugabe) as head of state at the summit.' The trade union federation has been vocally opposed to Mugabe's reign of terror and has insisted he is illegitimately in power after he snatched back power in the controversial one man run-off election in June.

Ignorance and State Failure at Root of Xenophobic Attacks
Poor management of migration by the state, along with many South Africans' ignorance about the rest of the continent, contributed to xenophobic attacks on foreigners five months ago, former University of Cape Town vice-chancellor Mamphela Ramphele said August 27. She also ascribed the attacks to an inferiority complex that resulted in the targeting of other black Africans during four weeks of unrest that left 62 people dead. "There is a self-image problem," Ramphele said at a panel discussion organised by the Centre for Development and Enterprise (CDE). Failure to instil an awareness of Africa was among the weaknesses of the school system, she said. However, Ramphele blamed government negligence for the general ignorance about the help that exiled South Africans received from fellow Africans prior to 1994. She alluded to the "cruel irony" pertaining to how the home affairs department treated Africans when South Africans were received with "such gentleness" by much poorer African countries during the struggle days. Ramphele said that in its failure to manage migration and live up to its international obligations on the treatment of refugees, the government had dumped them on the poor. Due to an existing lack of space and opportunities, this was like "pouring oil into the fire". She alluded to a "kind of dissonance" between what South Africans think of themselves and what the market said they were worth, particularly young black males who bore the brunt of the labour market's hostility towards pre-grade 12 dropouts. Ramphele's comments came as a new report by the CDE estimated that Johannesburg's immigrant population was about 14%, or 700000 -- a number CDE executive director Ann Bernstein said was well below the figures that had generated "a kind of popular panic". The figure was still above any level that could be an excuse for complacency or inertia, she said. She attributed the xenophobic attacks to the government's failure to provide direction. "We've had a singular failure in leadership in the country in how to cope with migration," she said, calling for acknowledgement that migration was inevitable given SA's dominant position in the region. Bernstein discounted competition for jobs as a major trigger of the xenophobic attacks, saying there were many jobs that South Africans did not want. "What does that say about people's expectations?" she said. In July, the CDE called for the government to appoint an independent expert commission, headed by a respected senior judge, to look into the circumstances and causes of the xenophobic attacks. A task force appointed by the government soon after the outbreak of violence did not offer any comprehensive reasons for the violence.

UN Helps Foreigners Uprooted By Xenophobic Violence Return Home
The United Nations is assisting foreigners displaced by xenophobic violence which swept South Africa earlier this year to return to their home countries. The violence - which also targeted asylum-seekers from such places as Zimbabwe, Somalia and Ethiopia, as well as ethnic minorities - claimed dozens of lives and left tens of thousands more homeless. Officials in Gauteng province had planned to shut six temporary camps housing 6,000 displaced people in August, but those plans have been put on hold by the country's Constitutional Court. The Constitutional Court has ruled that the temporary shelters housing thousands of displaced foreign nationals will stay open until the end of September. "Between the uncertainty surrounding the closure of the temporary shelters and the inability or reluctance o f refugees to reintegrate into local communities, the preferred solution for a growing number of them is to return to their countries of origin," said Pamela Msizi, a UNHCR protection assistant. On August 18, the agency helped fly 46 Congolese and six Burundians to their home countries. Another group of 23 Congolese and nine Burundians will be repatriated in September, and others have applied to return home. As long as the countries of origin are safe to return to, UNHCR stands ready to help with voluntary repatriation from South Africa, home to more than 128,000 registered refugees and asylum-seekers. Muchipayi Jim Comoda, who fled his native Democratic Republic of the Congo (DRC) seven years ago, escaped his home in South Africa's Bezuidenhout Valley after being beaten up by armed gang members. He said UNHCR's programme increased his desire to return to his hometown of Lubumbashi. "It's better than going back to a community that doesn't want you." Mr. Comoda had worked as a trader to support his wife and nine children. "These attacks have undone all that," he said, expressing his hesitation at the South Africans' assurances that it is safe for displaced foreigners to reintegrate back into the country's communities. Noting that he understands that the violence was perpetrated by only a few and not the majority of South Africans, he nonetheless said that his future lies in the DRC.

Several Agreements Signed at the SADC Summit
The Southern African Development Community (SADC) 28th Ordinary Summit officially closed August 17 with seven legal documents on decisions taken at the summit signed by all Heads of State. The summit, which discussed issues ranging from regional economic integration, peace and security, among others, saw the signing of the Agreement Amending the Treaty, Protocol on Gender and Development, and Protocol on Science, Technology and Innovation. The Agreement Amending Article 20 of the Protocol on Trade, and Agreement Amending Article 6 of the Protocol on the Tribunal and the Rule of Procedure were also signed. Addressing the official closing of the summit, President Thabo Mbeki said the summit had reaffirmed the seriousness of the work done so far by SADC. "During this summit, we have taken important decisions and what is left now is for Troika of SADC to do everything in its power to implement these decisions," said Mr Mbeki, who took over as SADC Chairperson on Saturday. The President said the Organ of SADC on Politics, Defence, Peace and Security Co-ordination had been continuing with talks aimed at finding a solution to the Zimbabwe situation on the sidelines of the summit since August 15. "This shows seriousness and appreciation with which we take this issue further. The Organ will continue working in this matter and I believe that decisions taken should be of great benefit to the people and government of Zimbabwe." On the economic front, the summit had noted the positive economic performance recorded by SADC member states in 2007 and called for concerted efforts to sustain the progress. Against this background, the summit observed with concern the new challenges emerging as a result of energy and food prices which risk reversed the gains made by the region. The summit had called for the acceleration of interventions to further deepen the regional integration agenda through the development of programme of co-operation aimed at expanding regional production capacity. This would entail the provision and rehabilitation of regional infrastructure to facilitate efficient movement of goods and people in a more open regional economy. President Mbeki also welcomed the return of the Republic of Seychelles to SADC and the hosting of the next SADC Summit by Democratic Republic of Congo (DRC) in 2009. DRC President Joseph Kabila, who had been elected as SADC Deputy Chairperson, thanked the SADC for choosing20DRC as its host for the next summit. "On behalf of our government, I would like to thank member states for showing their confidence in hosting the summit in DRC, we will do everything in our power to make sure that the summit becomes of high success," said President Kabila. He wished Mr Mbeki well on his tenure as SADC Chairperson.

Free Trade Area Officially Launched for SADC Region
The Southern African Development Community (SADC) member states officially launched a Free Trade Area (FTA) for the region August 16, ushering in a new era of economic integration. Launched during the 28th SADC Summit, the agreement ushers in a new era of economic integration and rapid industrialisation of the sub-region through expanded trading opportunities. Speaking at the official launch, Preside nt Thabo Mbeki, who is also the new SADC Chairperson, told delegates from SADC member states that the FTA was a collective milestone in the region's ongoing integration programme. "Today we can say with pride that our collective efforts have borne fruits, and that we have successfully met the objective we set ourselves. Indeed it required hard work, dedication, resolve and an unswerving commitment to mobilise our limited resources so as to meet our objective," President Mbeki said. With the goal of eliminating tariffs and trade barriers among member countries, the FTA agreement is part of the SADC's ongoing efforts to deepen long-term regional integration with the aim of accelerating economic growth while reducing poverty for the millions of people living on the continent. By August 2008, producers and consumers would pay no import tariffs on an estimated 85 percent of all trade on goods in the initial 12 countries, excluding Angola and the Democratic Republic of Congo, who will join the FTA later. It is expected to create a regional market worth about $360 billion, benefiting a total population of 170 million people and includes economies growing by up to 7 percent. As the region is about to take on this extensive work programme, President Mbeki told the delegates that they needed to assess how best they could advance the integration effort and the region's trade performance. He noted that the most serious constraints in growing the region were underdeveloped structures and supply capacity. As SADC, the President said, t he development of infrastructure and supply capacity should be their core priority. "We must intensify our collective efforts to build and diversify the region's productive capacity to expand the range of products that can be traded." As we do this, he said the region should continually strive to increase the value addition of those exports. "In this context, our sectoral work at harmonising regional industrial, agricultural and competition policy should be prioritised as we move forward." "Cross border infrastructure development would continue to play an essential role in advancing the integration agenda," he said. The implementation of the FTA area for SADC has been a long deliberate process that formally started in 1996 with the signing of the Protocol on Trade, which then entered into force in January 2000. It was implemented from September the same year following arduous negotiations on the tariff reduction schedules and rules of origin governing that Protocol. Since then, the liberalisation of tariffs has taken place at different rates. In general, the developed countries have reduced tariffs at a faster rate. South Africa, Botswana and Namibia removed most tariffs in 2000. Middle income countries such as Mauritius have gradually reduced their tariffs each year between 2000 and 2008. For least developed countries such as Mozambique and Zambia, tariff reductions have generally been introduced during 2007-2008. The SADC FTA programme includes establishing a Customs Union by 2010, a Common Market by 2015, a monetary Union by 2016 and a single currency by 2018. The gains and benefits to be achieved by member states would not be possible otherwise due to the economic size of the countries. These gains and benefits to be achieved include production, income and employment which would derive from larger economies scale, reallocation and best use of resources. This is because in a FTA, member states would be able to produce goods and supply them to the larger regional market as opposed to their national markets alone. The SADC FTA would have far reaching implications for people, companies and the economic process in all member states. The SADC member states that are to benefit from the FTA are Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe.

Free Trade Deal Full of Potential and Danger
The launch of a free trade area (FTA) within the Southern Africa Development Community (SADC) has brought the region one step closer to a regional customs union by 2010. But the launch of the FTA at the recent SADC heads of state summit was met with mixed reaction. According to Taku Fundira, an analyst at the Trade Law Centre of Southern Africa (TRALAC), the FTA is "intended to act as a catalyst for increased regional integration and to facilitate trade and investment flows within the region." TRALAC is a think tank based in Stellenbosch near Cape Town. "Some of the countries in the SADC are being prevented from fully benefiting from the gains of trade because of the size and nature of their economies. By integrating, countries are able to exploit scale economies while at the same time restructuring the regional economy in ways that benefit the production base of the region." However, one of the critics, trade specialist Dot Keet, told IPS that trade in the region is skewed in favour of South Africa - the strongest economy. "The trade deficits in the region are in South Africa's favour. Mostly South African companies are moving into and benefiting - in all sectors including communication, tourism, retail, trade, mining, airlines, banking, et-cetera." Keet is with the Alternative Information Development Centre (AIDC), a Cape Town-based non-governmental organisation focus sing on development research from a critical standpoint. She warned that many SADC countries are negotiating economic partnership agreements (EPAs) with European Union (EU) countries. "If there is a free trade area in the SADC region and the EPAs with its most favoured nation clauses are signed, it will open the doors to European imports," Keet told IPS. The "most favoured nation" clause in the EPAs requires African signatories to give the EU the same treatment as in future agreements with other countries signed subsequent to the EPAs. "It will be extremely difficult to monitor trade across porous borders - whether it is goods from SADC or Europe. Many of the SADC countries are willing to sign agreements which will undermine their own economic advancement. The EU is insisting on the liberalisation of finances, health and a number of services," Keet explained. "Most of the limited export sector of SADC countries is heavily biased towards the European markets. EU countries threaten African countries with tariff raises on imported goods if the EPAs are not signed." She added that, although South Africa is in a better position than the rest of the region as it has diversified its exports to South America, China and India, it is also reliant on Europe. According to Keet, SADC countries are further compromised as they are heavily reliant on foreign aid. They fear that the millions of dollars that are annually poured into these countries will be withdrawn if they do not sign EPAs. The establishment of the FTA is one of the targets set by the SADC countries before the establishment of the Customs Union by 2010. "Whether the Customs Union will become a reality within the next 18 months remains to be seen. There is too little time left." According to Fundira of TRALAC, the FTA will aid increased intra-regional trade along with inflows of foreign capital -- mainly from South Africa. "This will help to boost industrial development and the diversification of the export base. The FTA may also help to reduce uncertainty and improve the financial credibility of countries in the region. In turn this could boost private sector investment." Before the SADC summit, South African finance minister Trevor Manuel in a speech to the National Assembly in Cape Town warned that the fact that several SADC members were members of other regional groups could become problematic, as each group had its own way of negotiating with EU members. Manuel advised the different member states to decide on which regional grouping they wanted to be members of. Khumalo also believes that membership of different bodies pose some challenges. Tanzania, for example, belongs to more than one grouping. He has suggested as a way forward that SADC and the Common Market for Eastern and Southern Africa (COMESA) create a mutual free trade agreement. This will assist countries that do not want to pick one membership and leave behind another. In the end, it could help with trade integration across the African continent, Khumalo argued.

Bank Decision Spurs Hope for Lower Rates
The Reserve Bank's widely expected decision to keep the repo rate steady at 12% August 14 backs the view that lending rates have peaked and will fall significantly next year, bringing relief to SA's slowing economy. Analysts are betting interest rates will fall by up to three percentage points next year as inflation retreats in response to lower food and oil prices as well as changes in the way official consumer price indices are calculated. "We think that interest rates are going to fall from April and continue to fall at a modest but relentless pace with the repo rate reaching 9% early in 2010," said Absa Capital Research head Jeff Gable. The Bank's monetary policy statement was a "pretty strong signal" that SA's economy had reached the top of its interest-rate cycle, after a cumulative five percentage point increase since June 2006, he said. Other analysts agreed, although some think markets' rate-cut expectations for next year a bit too optimistic. "I think it's fairly likely now we are on hold unless we get any major bad news on the oil front," said Citigroup economist Jean-Francois Mercier. "But I'm not sure interest rates will fall as soon as markets are discounting ... I sense that the central bank will want to be sure that the inflation scenario is clearly improving before that happens." Mercier thinks that the first interest-rate cut will be next June, with the repo rate descending by a cumulative two percentage points over the year. "The market doesn't seem to have enough risk premium for the spectrum of possible outcomes on the inflation front." Bond yields, which move inversely to prices, plunged on the news yesterday. Yields on the benchmark R157 bond due in 2015 fell by 10 basis points to 9,18% while yields on the R153 bond due in 2010 plunged by 16 basis points to 9,80%. "We believe the repo rate will go to 9%, so the entire yield curve has a fair bit further to fall," Gable said. Rand Merchant Bank also expects interest rates to fall by two percentage points next year with the first cut in the second quarter of the year. "While the improved inflation outlook will result in an easing of monetary policy in 2009, the MPC (monetary policy committee) is unlikely to be aggressive," it said. The Bank pointed out that there were still "significant risks"20to the inflation outlook, which include volatility in oil prices and the rand, but gave more weight to "tentative signs" they have moderated since its last policy meeting in June and to the slowing economy. It said global oil prices had fallen by about $28 a barrel since the previous MPC meeting in June in a trend that was starting to reduce fuel prices, one of the main drivers of inflation. But the MPC statement predicted that inflation would average 7,2% next year and 5,9% in 2010, returning to the official 3%-6% target range by the second quarter of 2010. That is three months before its previous forecasts, but lags analyst estimates, which see CPIX below 6% late next year.

Inflation at 13 Percent but Near Its Peak Say Experts
South Africa's main inflation rate rose to 13% in July, a touch above forecasts, but government bonds rallied on the view that August 27's figures helped the case for keeping interest rates steady for the rest of the year. The annual rise in CPIX (headline inflation excluding mortgage costs) accelerated from 11,6% in June, driven by higher electricity, food, fuel and housing costs. Consensus forecasts had predicted that CPIX - which has now breached the Reserve Bank's 3%-6% target range for 16 months running - would rise 12,9%. But the slightly higher rise did not shake the view that consumer inflation was close to its peak, and will begin to subside next year, paving the way for cuts in lending rates. The Bank kept interest rates steady this month, saying CPIX would peak at about 13% in the third quarter, and then start falling "significantly" early next year. Absa Capital economist Monale Ratsoma said: "For the Bank, the data should be consistent with the recent decision to leave interest rates on hold. It also remains consistent with the view that the next move on rates will be downwards." Yields on government bonds, which move in the opposite direction to prices, fell as much as 18 basis points on the news while money markets rallied by a few basis points. Investec economist Annabel Bishop said she expected CPIX to creep above 13% this month, and then ease towards 11% by year-end as fuel prices continued to drop. "We expect no more interest rate hikes this year, and significant interest rate cuts next year," she said. Markets are pricing in two percentage points of rate cuts next year. That will reverse part of the cumulative rise of five percentage points between June 2006 and June this year, which has sharply curbed consumer demand, the economy's main growth engine. Headline consumer prices (CPI) rose 13,4% last month, up from 12,2% in June and just below forecasts for a 13,5% increase, Statistics SA figures showed. During the month itself, CPIX jumped 2,5% and CPI 2,1%. Electricity prices rocketed 23% during the month - in line with expectations as municipalities began to implement Eskom's tariff hike of 27,5% for this year. This pushed the annual rise in the fuel and power component of CPIX up to nearly 24% from 9,6% in June. Further pressure is expected this month as municipalities continue to pass price rises on to consumers. Food prices continued to rise last month despite a slowdown at the agricultural level, soaring 18,5% after an 18,2% increase in June, the data showed. A hefty 7% rise in petrol prices last month also put pressure on the transport component in both CPI and CPIX. A modest cut in local fuel prices in August and an expected 10% reduction in September will provide some near-term relief, although the longer-term outlook is unclear because of volatility in global oil prices. Housing costs were another inflation culprit in July, rising 3,2% in response to hikes in property rates and taxes after a countrywide reassessment. But the increase was lower than most had expected and Stats SA expects more effects from the n ew rates this month. RMB said: "Today's number increases the risk that inflation could peak in August, instead of July."

Producer Price Rise Biggest in 22 Years
The cost of goods leaving SA's factories, farms and mines surged by 18,9% in July - the highest in 22 years - buoyed by soaring power costs, official data showed August 28. Inflation measured by the producer price index (PPI) exceeded market forecasts for an annual rise of 17,5%. The news jolted government bonds, as markets moved to tone down speculation that a sharp fall in consumer inflation next year would prompt a series of interest rate cuts. In June, PPI rose by 16,8%. "With pipeline pressures this strong, a quick start to the easing interest rate cycle may not necessarily be the done deal the market has assumed thus far," said Standard Chartered Africa research head Razia Khan. "It indicates that inflationary pressures are still very much alive, and demand to be taken seriously. The rally in bonds appears to20have been somewhat premature," she said. Statistics SA deputy director-general Rashad Cassim said markets should remember that the annual rise in PPI this year was a "hybrid", reflecting big changes to the series this year. He said it would make sense to focus more on the monthly rise in the index, which surged by 2,7% in July. More than half of that rise was spurred by hefty electricity price hikes, which leapt 25,8% on annual tariff increases by power utility Eskom and winter adjustments. Manufactured food prices were also a big culprit, accelerating by an annual rate of 20,8% after a 19,4% rise in June. This flew in the face of a modest rise in food prices at the agricultural level, and could be blamed on rising transport, electricity and labour costs, analysts said. Investec economist Annabel Bishop said she did not expect producer price pressures to moderate this month, despite a small fall in petrol prices. The index was likely to rise 19,7% versus August last year, and peak in September above 21%, she said. But Bishop and most other analysts still think the Reserve Bank will keep interest rates steady this year, after raising them by a total of five percentage points between June 2006 and June this year. Economic growth is slowing and the longer-term outlook for inflation, which is what monetary policy focuses on, is looking more benign. This is largely because of changes to the way in which consumer prices are calculated, which take effect next year. These changes are expected to lower the official inflation rate -- which rose by a record 13% in July -- by up to two percentage points in January. Inflation is then likely to subside back within its official 3%-6% target range by the first half of 2010. Nedbank economist Carmen Altenkirch said if food and oil prices continued to decline, the Bank might cut interest rates in April -- but it would also assess wage settlements, which will feed into inflation expectations and prices.

Shock Trade Deficit Hits Rand, Current Account
The trade deficit widened to a near-record R14,3bn in July, after soaring oil prices pushed the cost of imports to a historic peak, data showed late August. The rand pared recent gains after the news from the South African Revenue Service (SARS), which took local markets by surprise. Consensus forecasts had predicted the shortfall would widen to about R3,8bn from R200m in June, but the data are volatile and hard to predict. "While the latest trade deficit is obviously a shock, the previous two months' deficits were uncharacteristically small," said Stanlib economist Kevin Lings. "Overall, the growth in imports, especially consumer goods, could slow a little over the next year. This should allow the trade deficit to at least stabilise and possibly improve over the next year." Imports surged 25,3% from the previous month to a record R75,6bn, boosted mainly by oil prices, which scaled a peak of $147 a barrel during the month. Machinery imports also climbed. Exports edged up a paltry 1,8% to R61,3bn as platinum prices fell 15% and gold 2,7%, offsetting an increase in the value of local coal exports. The cumulative deficit for the year to the end of July widened to R50,7bn from R40,9bn in the first seven months of last year, SARS said. The news re-ignited concerns about SA's deficit on the current account - its broadest measure of trade in goods and services - which reached a 26-year peak at 9% of gross domestic product (GDP) in the first quarter of this year. "For the rand, the overall pessimism on the trade and income balance suggests continued vulnerability," said Absa Capital in a research note. SA has so far not been able to take full advantage of soaring commodity prices by boosting mining output, which was hit by power outages in the first quarter of this year. The main problem is covering the cost of the current account deficit, which in the past few years was comfortably financed by foreign investment in local assets, mainly shares. But official data show that in the year to date foreigner s have sold a net R12,5bn of equities, compared with net purchases of R64bn in the same period of last year. "The massive trade deficit is not good news for the third-quarter current account deficit, suggesting the expected decline in the second quarter may be temporary," Nedbank economist Carmen Altenkirch said.

Country's Capital Expenditure Remains Robust
South Africa's economy remains in good health despite a slowdown in consumer spending. This is according to the latest Nedbank capital expenditure report which states that 80 new investments, to the value of R336.1 billion, were announced for the first half of 2008, reports SouthAfrica.info. "The sharp rise in the value of new projects announced is mainly due to major extensions to Eskom's capacity expansion programme announced in this year's National Budget," Nedbank senior economist Nicky Weimar said in a statement. "However, excluding Eskom's programme, capital expenditure plans remained strong." According to Ms Weimar, there were 64 new private sector projects, worth R72 billion, announced in the first half of the year. The finance and real estate sector accounted for R38 billion of these projects, mostly consisting of housing developments, as well as the construction of new and expansion of existing retail facilities. Likewise, the manufacturing sector featured strongly, with new projects of R25 billion, compared to R15 billion announced over the same period last year. "For the year as a whole, manufacturing may show a decline because a large number of projects were announced in the second half of last year. "In contrast to the private and manufacturing sectors, new projects announced by the mining sector dropped sharply off high levels, [as] continued uncertainty over the future electricity supply possibly also contained expansion plans." As a result, only R6.5 billion of new projects were announced in the first half of this year, compared with R27 billion over the same period last year. General government projects were also down from last year, with only 13 projects, worth R34 billion, being announced. The largest project in this category is the Moloto Rail Corridor Development, which will provide an integrated transport link between Gauteng and Mpumalanga. "While new capex pl ans by public corporations increased sharply, this was entirely due to the revisions to Eskom's capacity expansion programme." Ms Weimar further said capital expenditure would remain robust in the short term, with key threats being weaker-than-expected domestic and global economic growth and a worsening electricity supply constraint.

Nepad 'Needs More Private Investors'
Financing of New Partnership for Africa's Development (Nepad) regional infrastructure projects had reached $4,3bn between 2002 and last year, but investment from the private sector remained elusive for the body that seeks to revive Africa's economic development, according to Nepad Business Foundation chairman Reuel Khoza. Khoza told the Nepad/ Southern African Development Community infrastructure projects conference August 8 the figure represented 53% of Nepad's original estimated cost for its short-term action plan. The conference was meant to discuss ways of creating viable infrastructure networks to promote regional economic integration on the continent. Khoza said most of the funding to date had come from development finance institutions such as the African Development Bank and overseas investors, including Chinese and Indian. He said most of the investment had been made in four key infrastructure sectors -- energy, water and sanitation, transport, and information and communications technology. Among the infrastructure projects supported by Nepad and in different stages of implementation were the Mozambique-SA gas pipeline, the Morocco-Algeria-Spain electricity inter-connector, and the west Africa gas pipeline, Khoza said. There were another 15 projects in the pipeline with a total commitment of $8,25m. However, Khoza said attracting private sector investment remained a serious challenge, and both governments and the private sector needed to "operationalise" the philosophy of public-private partnerships. "Co-operation between governments and the private sector in Africa leaves a lot to be desired, and if significant progress is to be made in Africa's development, a more common world view between both sectors has to be established." He said African governments needed to do more to create enabling environments for businesses to invest in infrastructure. Khoza cited regulatory frameworks and "onerous" bureaucracies as some of the stumbling blocks to attracting private sector finance. "While significant progress has been made, there are certainly major challenges in the implementation of Nepad, particularly with regard to the need to scale up private sector participation and investment. "With very few exceptions, financing of infrastructure projects under the framework of Nepad has largely been dominated by development finance institutions and international actors, including India and China. While this is certainly a welcome development, it also represents both a challenge and an opportunity for the private sector in Africa." Addressing the same conference, Transport Minister Jeff Radebe emphasised the need for African governments to increase their spending on infrastructure if their economies were to be competitive. SA is spending nearly R600bn on the upgrade of infrastructure. "For the smooth movement of goods and services to enhance our competitiveness in the entire Africa and the world, the networking infrastructure and its human resources is a must," he said.

Jobless Rate Static for Two Years
South Africa's jobless rate dipped to 23,1% in the second quarter of this year, but has been stuck near that level for more than two years, a new official labour force survey revealed August 28. Statistics SA said that 106000 jobs were created in the second quarter of this year, reflecting faster economic growth and lowering the jobless rate from 23,5% in March. But its new historic data showed that although SA's jobless rate was revised down by up to two percentage points for each of the past seven years, it was exactly the same as in March 2006, when it was 23,1%. "The fact of the matter is that in broad terms, unemployment has gone nowhere since March 2006," said T-Sec economist Mike Schussler. "We are not creating jobs fast enough to meet the official goal of halving unemployment by 2014 - and it's more difficult to create jobs in a slowing economy." SA's economy has grown at more than 5% for each of the past four years, but is set to slow to between 3% and 4% this year and next as consumer spending and global demand wane. Over the past few years job creation has not kept up with growth in the labour force, which is flooded by young people leaving school every year. Despite concerted official efforts, lack of skills and poor education has also made it difficult for new entrants to get jobs, even when they are available. "The numbers are a shocking reflection of the fact that the economy is unable to stimulate satisfactory employment," said Standard Bank economist Shireen Darmalingam. The number of unemployed people fell to 4,1-million in June from 4,19-million in March, while the labour force grew to 17,84-million from 17,81-million, Stats SA said. Most of the jobs created in the second quarter of this year were in the community and social services sector, which notched up a rise of 71000. Two other service sectors, transport and finance, added 27000 and 20000 jobs respectively. Mining also showed a rise of 13000 jobs in the second quarter. But three key sectors shed jobs, with employment down by 51000 in trade, most likely due to the effect of higher interest rates on retail spending. Manufacturing shed 20000 jobs while agriculture lost 9000. Analysts said it was clear SA would fall short of meeting an official goal of halving unemployment to 14% by 2014. For that, 600000 jobs would have to be created every year. Schussler said this probably stemmed from the new definition of discouraged job seekers, which was narrowed to anyone who had given up looking for work for only three reasons. These are: no jobs in the area, no jobs for his or her skills, or no hope of finding work. Stats SA has overhauled the labour force survey, which in the past was released twice a year, with a time lag of six months. The new data - to be released every quarter from now on - have been simplified, with the questions for respondents cut to 79 from 140.

Company Failures and Bankruptcies Set to Increase
Company failures and personal bankruptcies have continued to soar at a shocking pace this year, providing grim evidence of the toll which soaring inflation and debt costs are taking on the economy. Corporate liquidations leapt 17,6% in July versus the same month last year, taking the annual rise in the year to date to 11,5% - the first increase for that period in six years, Statistics SA said August 28 Personal bankruptcies rocketed nearly 32% in June compared with the same month last year and soared more than 37% in the first half of the year, the data showed. "The figures are volatile but the broader trend20in the year to date is really concerning," Standard Bank economist Danelee van Dyk said. "Companies are taking a bit less strain as they are more able to fend for themselves, but you can see disproportionate stress on consumers and this will carry on for a while." Van Dyk said bankruptcies would climb 30% over the whole of this year versus last year, as households buckled under the stress of soaring inflation, higher debt costs and slowing income growth. Analysts said debt costs as a portion of disposable income had probably risen to about 12% from 11,3% in the first quarter -- levels last seen in 1999. At that time, prime lending rates were above 25% against 15,5% now. But the burden on consumers may be worse this time as their debt has climbed to 78% of disposable income from 60% nine years ago. Van Dyk said continued strong growth in credit extension to the private sector partly stemmed from "distress borrowing", which meant borrowing just to finance the cost of existing debt. The squeeze will get worse before it gets better as the Reserve Bank raised interest rates by one percentage point in the first half of this year, and it takes changes in monetary policy up to two years to make themselves fully felt. At its policy meeting this month, the Bank held its key repo rate steady at 12% despite a further pickup in inflation, with its governor Tito Mboweni acknowledging that the economy was taking strain and "a lot of folks are in distress". Luke Doig, senior economist at Credit Guarantee Insurance, said the data backed his view that company failures would rise at least 20% this year and next. His firm is SA's leading underwriter in debt insurance between companies. "Most of our current experience shows a 21% increase in the number of claims paid so far this year, while the value is up by 31%," he said. The Stats SA data showed that the largest number of company closures were in finance and real estate, which rose 45,5% in July, followed by retail and wholesale trade, which climbed 28%.

Court Ponders U.S. Extradition Deal
The actions of President Thabo Mbeki in delegating some of his duties to his ministers was under scrutiny in the Constitutional Court August 26 when it considered whether an extradition treaty signed between SA and the US in 1999 was valid. The court was dealing with two conflicting judgements from the Pretoria High Court passed in the space of a few months about the extradition agreement. In March, Judge Ferdi Preller declared that the extradition treaty signed in September 1999 had not been incorporated into the law of SA and that the treaty was of no force and effect. He was dealing with the applications of Steven van Rooyen and his partner Laura Brown, wanted in the US for operating a clinic performing "stem cell transplants" on terminally ill patients, and Cape Town businessman Nello Quagliani, wanted for drug dealing in the US. However, in June Acting Judge Piet Ebersohn dismissed a similar application by Steven Goodwin who was detained in the US at the request of South African authorities. Goodwin is wanted by authorities in SA for his role in the demise of Fidentia Asset Management. Lawyers for Quagliani, Van Rooyen, Brown and Goodwin told the court the extradition agreement was not valid for several reasons. One of these was that the agreement was not lawfully approved by delegates in the National Council of Provinces as they had not received mandates from the provincial legislatures. They also argued that only the president was authorised in terms of the Extradition Act to enter into extradition agreement with foreign states. They contended that because the president did not enter into the extradition agreement, it was not entered into lawfully. The then justice minister, Penuell Maduna, signed the treaty in Washington DC and did so in terms of authority granted in the presidential minutes on behalf of SA. Peter Hodes SC, for Van Rooyen and Brown, said the president did not enter into an extradition agreement with the US as contemplated in the Extradition Act. Piet de Jager SC, for President Thabo Mbeki, Justice Minister Brigitte Mabandla and the director of public prosecutions, told the court the treaty was "self-executing" and did not need any further legislation to be operational. He said the treaty was not in conflict with any laws of the country. De Jager said Mbeki did not delegate his powers, but assigned Maduna to undertake a task for him. The court reserved judgement.

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AUTOMOBILES

Time to Rethink Motor Industry Incentives

Many people try to justify the need for subsidies with things such as job preservation and "economic development". In fact, subsidies do the opposite - they essentially transfer taxpayers' money to support the dividends of business owners. The government could use this money for other projects, and if a business needs taxpayers' funds to survive - particularly a mature business - it shouldn't be in business at all. It should be a government-owned business. One of the Motor Industry Development Programme's aims is to enable local manufacturers to become competitive globally. So was the local content programme before that, and the one before that. And actually we don't have car manufacturers anymore -- just some parts makers and the assembly subsidiaries of the global groups, which put cars together with parts that are mainly imported. The motor industry has become a global force. It can and does bargain with investment-hungry countries for the biggest dollop of taxpayers' money -- they now call these "incentives" - before they set up operations. However insidious this may seem - taxpayers paying for their cars through tax and again at the showroom -- it is unfortunately established practice globally, something which we probably cannot afford to turn a blind eye to. If taxpayers must bale out the industry once more, couldn't we subsidise the establishment of local component production facilities? At least then we would know the money will go into bricks and mortar, that at least some new jobs will be created, that we will be adding value to our resources in the process, and that our exports will continue to grow.

Vehicle Sales May Bottom Out Soon
Even though vehicle sales remain depressingly low, some economists cautiously note that the trough in the free-fall in vehicle sales is in sight. The National Association of Automobile Manufacturers of SA (Naamsa) August 4 said new vehicle sales slid 19,7% year on year in July to 42438 units, from 52856 units during the corresponding period last year. In June, new vehicle sales decreased 21,9% on the year to 39062 units. The latest vehicle sales data reaffirmed the stranglehold high interest rates, surging inflation and huge consumer debt levels still have on vehicle manufacturers. But signs of a turnaround were beginning to appear, Standard Bank economist Danelee van Dyk said. The improvement in vehicle sales was spurred by expectations the Reserve Bank was unlikely to increase interest rates this month, she said. Citigroup economist Jean Mercier said: "We might have to wait for several months or a quarter" before making a call on a turnaround. Naamsa said: "Despite the fact that July was traditionally a relatively strong month from a seasonal perspective, the daily sales rate during July (last year) had continued to hover around the lowest levels experienced over the past four years." But the association said the demand from car rental companies had provided support. Naamsa said the downturn in light commercial sales had also increased in pace. Sales of new light commercial vehicles, bakkies and minibuses were at 13164 units last month, reflecting a decline of 23,5% compared to the 17206 unit sales during the corresponding month last year. The association said sales of vehicles in the medium and heavy truck segments of the industry showed a mixed picture. During the period under review, the medium segment recorded a substantial decline of 24,1% to 1058 units, while the heavy truck se gment posted a gain of 6,1% to 2201 units. "This could be viewed as evidence that the downturn is spreading beyond the consumer market," Nedbank said. But new vehicle exports continued to rev up local vehicle and component manufacturers. New vehicle exports set a new monthly record of 28269 new vehicles. This represented an improvement of 13022 vehicles, or 85,4%, compared to the 15247 vehicles exported in July last year. Explaining this exceptional performance, Naamsa said the Motor Industry Development Programme had again buttressed new vehicle export, cushioning "the operations of vehicle and component producers" from "the severe downturn in the domestic market".

Indian Group M&M in Country for Long Haul
INDIAN corporate giant Mahindra & Mahindra (M&M) has captured just under 3% of the local vehicle market after four years, but it is tackling the challenges and is here for the long term in spite of a slow start. Vijay Nakra, CEO of Mahindra's South African operations, said. SA remained a strategic market for the group, in addition to providing a platform for it to tap into the potential that the rest of the continent offers. The global conglomerate had made inroads into the South African market through 40 new dealerships and it would soon be celebrating the sale of its 10000th vehicle since arriving in SA. Nakra said the company had also managed to start businesses in markets outside SA, including Botswana, Zambia, Zimbabwe, Namibia and Swaziland. "Business is very well at the moment and beyond expectations," Nakra said. "We are happy with the progress we have made in the past four years and are not shy to invest here. This is a strategic market, and we are therefore taking a long-term view of our investment." In terms of the group's market share, Nakra said he was unfazed by its "humble beginnings". The biggest challenge for the group, he said, had been that SA was a "matured and complex" market -- "even more matured than automotive markets in the developed countries". "The South African market is made more complicated by the fact you have more than 60 brands. Brand loyalty has been a big challenge for us." He said that in spite of the complexities of the local market, SA's vehic le sector was a more open market with very low barriers to entry. He believed M&M products did well in Africa as they were suited to African conditions. While the South African market was small by world standards -- with about 370000 vehicles sold in the past year -- he said M&M remained confident the market was growing at a rate that justified its investment. The group entered the South African market in October 2004 by selling its Bolreo multipurpose truck and Scorpio sports utility vehicle. Last year saw M&M launch its tractors in SA. The Mumbai-listed company, which was established soon after the end of the Second World War, has grown into a global conglomerate with operations in the US, South America, Europe, the Middle East, Malaysia, China and Australia. MD Anand Mahindra said: "If you can compete globally, you can survive at home. We are a group in a hurry, and are engaged in an ambitious, sustained and multipronged penetration of the global arena, including Africa."

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INTERNATIONAL ECONOMIC RELATIONS

South Africa and Turkey Solidify Economic Relations

South Africa and Turkey have sought to strengthen their bilateral political and economic relations at the First Turkey-Africa Co-operation Summit August 20. At the two-day summit, Turkey's President Abdullah Gul held individual meetings with Heads of States and foreign ministers from diff erent African countries. During a meeting between Deputy President Phumzile Mlambo-Ngcuka and President Gul, progress made in various areas of development cooperation between the two countries was discussed. The talks between the two also focused on further developing and diversifying relations for the future. Deputy President Mlamblo Ngcuka, in the meeting with President Gul, said both countries had to admit that they still had not maximised the full potential that existed on the trade front. She said although economic co-operation had increased Turkish investment initiatives into Africa, there was a need to increase commitment towards skills transfer to Africa. She said this was necessary for balanced development and sustainable partnership between the two countries. President Gul also agreed that more could be done; saying the current level of political, economic and cultural interaction between the two countries was far from reflecting the real potential. In line with the Agreement on Air Transport, President Gul added that Turkish Airlines recommenced three flights per week between Istanbul and Johannesburg and Cape Town from October 2007. This he said was an important development as it shortens the distance between the two countries and contributes to an increase in business contact and tourism exchanges. President Gul also raised the issue of Turkey's intention of wanting to become a non-permanent member of the United Nations Security Council (UNSC) in 2009/10. Turkey was a founding member of the United Nations has not held a seat in the Security Council for almost half a century. Also addressing the summit, Turkey Foreign Minister Ali Babacan said: "If Turkey wins a non-permanent seat on the UN Security Council, this would do much to promote peace, security and stability all over the world". Minister Babacan also assured his African counterparts that if Turkey secures a seat on the council, it will serve as the voice of African countries there. South Africa and Turkey relations were well developed with diplomatic representation in both countries. South Africa is Turkey's largest trade partner in sub-Saharan Africa. Turkey has increased its trade volume with African nations from around $5.4 billion to $13 billion in less then three years, and is targeting $30 billion by the end of 2010. For Turkey in 2007, the top export products to South Africa included fuel, motor vehicles, tractors, sanitary products and household products. In 2007 the top South African export products to Turkey consisted mainly of raw materials and semi-manufactured products, including gold, bituminous hard coal, catalytic converters, motor vehicles and automotive spare parts.

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LAND REDISTRIBUTION

Controversial Expropriation Bill Shelved

Despite one of the most intensive programmes of public hearings in the democratic Parliament's history, "lack of proper consultation" has been cited as the reason for "shelving" the controversial Expropriation Bill. Parliament's public works committee held hearings in all of the provinces and in the National Assembly on the draft bill. There was an explosion of objections to the bill and dire warnings that if enacted it would undermine the property market, scare off foreign investment and contravene the constitution's property clause. While there have been expressions of gratitude from opponents of the bill on the news that it had been shelved the status of the bill was still unclear August 27. Normally, if a bill is withdrawn this is done by the cabinet minister responsible. In thi s case, public works committee chairwoman Thandi Tobias-Pokolo announced in Parliament it had been shelved until further notice. But it was not clear if this meant that it would be redrafted or if, after further "consultation", it would simply be reconsidered. During the public hearings, a wide range of organisations such as agricultural unions, property associations, civil society groups and banks warned that the bill was a gross contravention of section 25 of the constitution, which protects property rights. Drawing the most fire were provisions that would allow all property, not just fixed property, to be expropriated in the public interest and the clauses that would confine the courts to ruling only on the process of an expropriation. The constitution states the courts can decide on what constitutes fair compensation. The government has insisted all along that the provisions of the bill were firstly to bring it in line with the constitution and also to inject some haste into the land-reform process. Announcing the shelving, Tobias-Pokolo said the decision was reached after further consultation with interested parties both inside and outside Parliament. She said advice sought by the committee indicated "more time was needed to ensure that a wide variety of stakeholders had been consulted and that public participation may have been insufficient to see the bill through". AfriForum, one of the bill's most strident opponents, welcomed the decision. CEO Kallie Kriel said: "The retraction of the Expropriation Bill is proof of the power civil society can exert when its organisations co-operate with each other. "The Expropriation Bill's stipulation that the expropriation amount may be less than the market value of the property, and that market value will not be the determining factor, would have deterred local as well as international investors had it been implemented." Tobias-Pokolo said the committee hoped the bill would return in the "next Parliament". This means that the delay could be until after the election next year, which is expected to be held in April. Neil Gopal, CEO of commercial property organisation Sapoa, said the shelving of the bill was due to the efforts of Sapoa and other bodies. "I heard a few weeks ago that the parliamentary legal advisers concurred with Sapoa's position, which was that certain provisions of the amendment bill were unconstitutional and there were other aspects such as the definition of property that needed clarification," said Gopal. But Sapoa still supported land reform, Gopal said. Berry Everitt, MD of real estate group Chas Everitt International, said he thought the bill had been only "postponed", but that it was "good news and that the government had listened to the petition from the business community". Samuel Seeff, chairman of Seeff Properties, said it was a "positive" move and just what was needed to give people "greater confidence in property in that their rights are protected".

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MINING

Xstrata's £5 Billion Bid Not Welcome

Diversified mining group Xstrata could be almost as big as Anglo Platinum, the world's biggest platinum producer, within 10 years if its hostile bid for Lonmin succeeds. In the short term, the acquisition would make Xstrata the world's third-biggest platinum producer after Angloplat and Implats. Xstrata said August 6 it would offer £33 in20cash for every Lonmin share, 42% above Lonmin's £23,19 share price on August 5, valuing Lonmin at £5bn (R70,3bn). Lonmin's shares surged 50% to R498 after the announcement. The bid is bigger than Harmony's failed hostile R53bn all-share offer for Gold Fields in 2004 but smaller than the £75bn (R1,1-trillion) BHP Billiton bid for Rio Tinto. Xstrata CEO Mick Davis said on a conference call that discussions with Lonmin's major shareholders showed they found the offer price appealing, there was some impatience with progress at Lonmin, and a rival bid was unlikely. Lonmin termed the offer "opportunistic and entirely unwelcome" and said the price undervalued its "unique assets". Numis Securities analyst Simon Toyne valued Lonmin at £38 a share, so if the offer went through at £33, Xstrata could extract value. Toyne said as far as shareholders were concerned, "recent declines in PGM (platinum group metals) prices driven by poor conditions in the western world automotive industry also heighten the attractions of a cash bid to Lonmin shareholders at this time". Platinum share prices have plunged in recent weeks as the platinum price has shed almost 30% since mid-May to about $1610/oz August 6. Over five to 10 years, Xstrata could build up to about 2,2-million ounces of platinum production a year if all possible projects came on stream, compared with Angloplat's projected 2,4-million ounces of refined production this year. Lonmin's original forecast was to be a 1-million-ounce-a-year producer, but it has fallen well short of targets. Davis said it was premature to forecast production, but Xstrata's immediate aim was to restore Lonmin to the same level of production as two years ago. After that there were expansion possibilities. Xstrata's 100%-owned Eland Platinum is ramping up production to 500000oz-600000oz a year, and its 50% stake in the Mototolo joint venture will provide 100000oz. It also announced that it had entered into a joint venture agreement with Nkwe Platinum, which could lead to the development of a mine producing 1-million ounces a year, of which Xstrata would have a half share. Davis said Xstrata could turn Lonmin's under-performing operations around. At a time of robust platinum prices, Lonmin had been consistently failing to meet its own forecasts. In the year to September, Lonmin expected to produce 765000oz-770000oz of platinum, 18% below the 939654oz produced two years ago.

Xstrata-Nkwe Deal May Start Platinum Mine
Xstrata has entered into an agreement with platinum explorer Nkwe Platinum and its empowerment partner Genorah that could lead to the development of a platinum mine and refinery costing about $2bn. The deal was announced when Xstrata launched a $10bn bid for Lonmin. Nkwe, listed on the Australian Stock Exchange, is 48% owned by Genorah Resources. Nkwe director Mxoleli Nkuhlu said August 6 it granted Xstrata an option to take a 50% interest in five properties on the eastern limb of SA's Bushveld complex because it was seeking a partner with expertise and financial resources. Nkwe has already undertaken some exploration on the properties and estimated they contained 20-million ounces of platinum group metals (PGMs). The objective is to prove up 100-million ounces, which would support a mine producing a million ounces of PGMs a year. Xstrata can exercise its option on completion of the bankable feasibility study, and would earn its interest by funding the mine costing $1,6-$2bn. Nkwe intends listing simultaneously on London's AIM and the JSE by the end of October.

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PETROCHEMICALS

HSBC to Advise Petrosa on $11 Billion Coega Refinery

Petrosa has appointed financial services group HSBC as the project adviser for the $11bn Coega crude refinery project, the national oil and gas company said August 27. The announcement is the latest development in the mooted 400000 barrels a day project, also known as Project Mthombo. The facility will bring additional refining capacity to an industry that is under strain to provide growing demand for liquid fuel. The refinery is part of the government's plan to security of fuel supply. The project is likely to alleviate SA's reliance on Durban, which handles most of the country's crude imports. PetroSA spokesman Thabo Mabaso said HSBC would manage the investment funding and st ructuring arrangements of the project and provide fiscal guidance. CEO Sipho Mkhize said: "We are delighted to be working with a global partner of this calibre. HSBC's pedigree and track record with mega investment in the refining industry adds to the confidence the commercial market demands of projects of this nature. "With the awarding of this contract, the Coega refinery project is now entering the seminal chapter of an initiative that will make a significant contribution towards improving and sustaining SA' s future liquid fuels needs -- a principal objective of the government's energy security master plan." The refinery is in response to the recommendations for the liquid fuels sector that PetroSA procure about 30% of all crude oil consumed in SA. Mabaso said PetroSA would announce an engineering partner in October. The company announced a tender for the partner in July. The partner would execute the feasibility, front-end engineering design and project management through to commissioning of the refinery. Mabaso said the group would also announce its legal adviser in October. It has already appointed KBC Advanced Technologies as technical advisers. Construction for the refinery in the Coega industrial development zone is expected to commence in 2010 and commissioning in 2014. According to PetroSA, the refinery, which is one of the biggest post-2010 projects, would create about 8000 direct jobs and 39000 indirect jobs.

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TELECOMMUNICATIONS

MTN to invest in its Networks as Congestion Bites

Celluar operator MTN is making heavy investment in its networks a top priority, aiming to sink almost R25bn into its infrastructure by the end of this year. Congestion on its networks in Nigeria has cost it market share, and its operations in other countries also risk losing ground because they are unable to keep pace with demand, CEO Phuthuma Nhleko said August 28. Since its subscribers have soared 53% to 74,1-million compared with 43,3-million a year ago, its operations are taking strain. MTN has approved capital expenditure of R30,5bn for the year, with R7bn earmarked for jacking up its network in SA and R13bn for Nigeria. So far it has commissioned various projects costing R24,5bn, but it must step up its pace as it has only spent R10,3bn in the six months to June 30. MTN's interim results issued August 28 showed no slowdown in its growth. Revenue of R46bn was up 35% from R34,2m a year ago, although profit after tax rose a more modest 10,5% from R6,3bn to R6,7bn. That was largely because the end of a tax holiday in Nigeria saw its overall tax rate spike to a hefty 44%. That should stabilise to somewhere under 40%, Nhleko said. Diluted earnings a share rose 14,1% from 286,cc to 326,6c. One analyst said the results were "great" and the future looked even better. "The important thing is that they are well positioned for growth because they are investing ahead of their competitors, so they will gain market share while their competitors will sit with congestion." The slow growth in profit after tax was not a serious worry, he said, as the tax spike was an anomaly for the year. Nhleko said little about MTN's abortive effort to tie up with India's Bharti or Reliance Telecoms earlier this year, and said fresh speculation that it was considering entering South America was the result of "fertile imaginations." Mergers or acquisitions were important to diversify its earnings and risks, and to gain economies of scale, he said, and MTN was always looking for o pportunities. "We haven't looked at South America. Africa, the Middle East and most probably further east is the most logical expansion area for us." Not all existing cellular operators would survive, and MTN intended to be on the acquisitive end of the inevitable mergers, he said. One analyst said MTN would continue to expand in Africa by picking up small operators. In SA, profit margin on earnings before interest, tax, depreciation and amortisation (Ebitda) fell from 35,5% to 33,5% as it made amends for a previous lack of investment in network capacity. Nigeria remains its more vigorous growth market, with a revenue of R13,4bn for the interim period generated by 18,5-million users. Yet its activities were stifled by network congestion serious enough for the regulatory authority to fine it $20m and ban it from advertising until it increased its call-carrying capacity. MTN's operation in Iran produced its first after-tax profit, posting Ebitda of R563m, up from a loss of R181m.

Nigerian Springs Vodacom Surprise
One of Nigeria's wealthiest entrepreneurs has made a surprise bid to Telkom, proposing to create a pan-African telecoms giant by marrying Telkom's 50% stake in Vodacom with Nigeria's cellular operator Globacom. The bid threatens to disrupt a plan already at an advanced stage for Telkom to shed its 50% stake in Vodacom by selling 12,5% to the UK operator Vodafone for R18,75bn and distributing the rest to its own investors. The man behind the move is Mike Adenuga Jnr, who owns 100% of Globacom and has interests in real estate, the Equatorial Trust Bank and Conoil. Globacom serves 18-million subscribers, making it Nigeria's largest operator after MTN. It also runs networks in Benin and Ghana. Adenuga has submitted his proposal to Telkom. Mowana Investment is the local broker for the last-minute bid. Its director, Joe Fizelle, said the new deal offered far better prospects for Telkom shareholders than seeing Vodacom subsumed by Vodafone. Fizelle hopes the proposal will be considered as he believes it offers value and growth potential to Telkom shareholders. The deal would see 100% of Globacom merge with Telkom's 50% stake in Vodacom in a new listed entity dubbed "Vodaglo", with an estimated value of R140bn. Mo wana believes Globacom and 50% of Vodacom are each worth about R70bn, and would be equal partners in Vodaglo. Telkom's fixed-line business would remain separately listed, but could work with the Nigerian operator to fulfil Telkom's goal of offering a blend of fixed and mobile services in numerous other African countries. The deal would thwart Vodafone's ambition to take control of Vodacom, but the UK operator could benefit by having Globacom as its Africa partner, Fizelle said. Mowana hopes that the government, with a 39% stake in Telkom, will find the Nigerian offer more attractive than the idea of retaining a minority interest in Vodacom and seeing it become British owned. Under the Nigerian offer, Telkom shareholders would hold stakes in both the fixed-line and mobile entities and enjoy pan-African growth from both, Fizelle said. One analyst said Globacom's proposal was interesting but unlikely. Talks with Vodafone had a high probability of success, he said, as the offer was generous to Telkom shareholders, and separating Vodacom out of Telkom would unlock the value of both entities. He questioned whether Vodafone could block the attempt to merge Vodacom with Globacom. But Fizelle said Vodafone would not be able to stop the move as Globacom would be merging with only the 50% of Vodacom that was owned by Telkom.

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Telkom Wins R1,7 Billion Absa Deal
Telkom has won a R1,7bn five-year deal to provide networking technologies to connect 2548 Absa sites across SA. The deal is one of the biggest Telkom has signed with a corporate customer, and will boost its efforts to defend and grow its revenue by providing a wider range of services to fend off mounting competition. CEO Reuben September said its network and network management abilities meant Telkom could still deliver value-added services at speeds and quality levels that outshone its rivals. "The Absa contract is further validation of our success in winning large corporate accounts. It attests to the depth of our technology and project management skills," he said. Absa chief administration officer Ian Russell said revamping its network would help the bank to maintain its leadership and keep abreast of industry developments. "In the past 24 months we conducted interna l investigations into the operations of our wide area network and concluded that it needed a revamp." The deal will let its branches expand, give them live connectivity and provide backup and recovery services in the event of disaster. The network will carry data between Absa's branches, its ATMs and its data centre. "This is not a cost-cutting exercise but a process aimed at further improving our efficiency levels," Russell said. The upgrade should cut Absa running costs by speeding up data transmission and improving bandwidth capacity. Telkom's main new rival is Neotel, which says it has signed up almost half of SA's top 350 businesses in deals worth R1,5bn. But so far most only use Neotel for a fraction of their telecoms needs.

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